Kolkata: Close on the heels of banks telling the sparring co-promoters of Haldia Petrochemicals Ltd (HPL) that they wouldn’t get loans unless efforts were made to rope in a strategic investor, Partha S. Bhattacharyya, the firm’s managing director, told employees at a town-hall meeting on Tuesday that the company has to have “backward linkage" with a refinery for long-term viability and that at least two public sector companies from the petrochemical sector have lately expressed willingness to take over the cash-strapped firm.

HPL has had to scale back production to 50% of its peak capacity for want of working capital, according to officials who did not want to be named. It is unable to buy naphtha and is exploring ways of keeping its plant running without buying naphtha on its own. “Even so, the operating margin is negative, which means the working capital currently available with HPL is fast depleting," said one of the officials.

Interim plan: HPL managing director Partha S. Bhattacharyya. Photo: Indranil Bhoumik/Mint

Faced with an exodus of employees “across ranks", Bhattacharyya addressed over 400 employees at HPL’s plant to allay fears of the company closing down or stopping to pay salaries. The firm, according to an official from its human resources (HR) department, has lost at least 70 people in the past six months. “The rate of attrition in the past two months is alarming," the HR official said, asking not to be named.

Bhattacharyya told employees on Tuesday that there was no question of the firm closing down, though he didn’t rule out suspension of production, said the people cited above. To revive confidence among employees, he said in his brief address that there are at least two public sector companies that are willing to take over HPL, and that they had the resources to make the firm viable in the long run.

“The aim was to allay unfounded apprehensions among employees," Bhattacharyya said in an interview on Wednesday. “The concerns aren’t unusual considering the difficulties HPL is struggling to cope with."

He had exhorted HPL’s employees to “intensify team efforts to... add value through innovative thinking for survival in the near term," adding that he also spoke of the need “to secure integration with sources of naphtha in the long run".

Bhattacharyya appeared to be of the view that handing over the reins of HPL to a state-owned company was one of the ways of ensuring long-term viability, said the people cited above. He spoke of other means of securing naphtha and of keeping the plant running, but these appeared to be short-term measures till HPL was integrated with a naphtha-producing refinery, they added. TCG chief Purnendu Chatterjee, who last year handpicked Bhattacharyya for the job, overcoming opposition from the state government, continues to “vehemently oppose" proposals to sell majority control to public sector companies, according to a key TCG official who, too, did not want to be identified.

Chatterjee, who is also HPL’s deputy chairman, insists that the West Bengal Industrial Development Corp. Ltd (WBIDC) should immediately transfer 155 million shares of the firm to TCG as was envisaged by a March 2002 agreement. This, according to him, is the first step to be taken to rescue HPL.

The proposed share transfer was aborted in 2005 because, according to WBIDC, TCG couldn’t fulfil its commitment to infuse funds into HPL. The transaction would have given TCG, which currently owns 41% in HPL, majority control of the firm. For the past seven years, WBIDC and TCG have been fighting legal battles over aborted transfer of shares and other management-related issues.

West Bengal’s commerce and industries minister and HPL’s chairman Partha Chatterjee said the state government would decide on future steps after the firm’s next board meeting due this month, but “if we are to sell our stake, we will determine the buyer only through an auction". “Our immediate priority is to improve operational efficiency," he added.

Partha Chatterjee is expected to meet next week representatives of one of the companies looking to buy-out HPL.

Besides taking various initiatives to cut costs and to create new revenue streams, HPL is exploring ways to turn itself into a “contract manufacturer", said the firm’s officials cited above.

Bhattacharyya told employees on Tuesday that HPL was looking to get into manufacturing pacts with large traders under which it would receive naphtha from them and convert it into polymers for a fee. This, Bhattacharyya told employees, was a way to keep the plant running till HPL has resources to buy feedstock on its own and the polymer market looks up.